RE/MAX New Horizons

At RE/MAX New Horizons, we measure success by client satisfaction. We provide agents who know understand Rhode Island’s ever-changing market and neighborhoods. Knowledge and experience are the keys to successful real estate transactions. This blog contains valuable information to provide you with the real estate knowledge you need. We are committed to working with you to make your dreams a reality. Learn more at www.BestHomesRI.com.

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Wednesday, September 23, 2015

There is no question that selling a home
is an important event. A home sale represents transition, movement and change.
Big money is involved.

Households move from the known and
comfortable to the unknown and a period of adjustment. There may be job changes,
new schools, distance from old friends and the possibility of new ones.

No less important, a home sale by itself
can be complex. There will be people looking at your house, documents to sign
and issues to be negotiated.

Because a home sale involves an array of
both personal and business concerns, it's important to get it done right. You
need to carefully prepare your home, understand the market and see what
alternatives are realistically available. The old motto "be prepared"
is a good guide in such circumstances.

What's
an acceptable offer?

The goal of every seller is to have a
line of buyers outside the front door, each clutching higher and higher offers.
And while this has been known to happen, in most markets there is some balance
between the number of buyers and sellers.

A number of factors determine whether a
buyer's offer is acceptable. They include:

Is the offer at or near the asking
price? Is the offer above the asking price?

Has the buyer accepted the asking price
or something close? Has the buyer then buried thousands of dollars in discounts
and seller costs within tiny clauses and contract additions?

What is the alternative to the buyer's
offer? If a home has not attracted an offer in months, then sellers need to
determine if a better deal is possible -- recognizing that each month costs are
being incurred for mortgage payments, taxes and insurance.

Does the owner have enough time to wait
for other offers?

What if no other offers are received?

What if several offers are received? Do
you choose the high offer from the purchaser with questionable finances who may
not be able to close, or a somewhat lesser offer from a buyer with preapproved
financing?

In each case, owners -- with assistance
from REALTORS® -- will need to carefully review offers, consider marketplace
options and then determine whether an offer is acceptable.

What
is a counter-offer?

When a home is made available for sale
the owner is essentially making an offer to buyers: For a given number of
dollars and other terms you can acquire this home.

Buyers, in turn, can respond with
several options:

Not interested.

Yes, we'll buy on the owner's terms.

We're interested and here's our
counter-offer.

A counter-offer is nothing more than a
new offer. And just as the buyer had three options in response to the owner's
original price and terms, the seller can now choose one of three reactions:
accept the offer, decline the offer or make a fresh counter-offer.

Offers and counter-offers reflect the
back-and-forth activity of the marketplace. It's an efficient and practical
process -- but also one that may contain tricky clauses and hidden costs. The
REALTOR® who lists your home can explain the local bargaining process in detail
and assist in the actual negotiations.

How
do you negotiate?

It's sometimes argued that negotiation
must produce one "winner" and one "loser." Others suggest
that a "win/win" situation is possible where each side gets something
of value.

Real estate bargaining typically involves
compromises by both sides. It's not war; it's not winner-take-all; and it's not
the time to take personally any comments made by purchasers.

Instead, negotiating should be seen as a
natural business process; buyers should be treated with respect; and owners
should never lose sight of either their best interests or their baseline
transaction requirements. These are the standards unique to each owner, which
must be met before the home can be sold.

An appraisal provides the lender, who is
processing a loan application for the purpose of purchasing or refinancing a
home, a comprehensive report written according to the Uniform Standards of
Professional Appraisal Practices and containing a licensed appraiser's expert
opinion of current market value of the home that will be used for collateral.

Appraisal is an
expert opinion, not an exact science. It is date specific and does not provide
a value guarantee. While the appraiser may observe and factor visible
structural problems into the opinion of value, an appraisal is not a home
inspection. You are encouraged to seek the advice of applicably licensed
experts if you have questions about the structural or mechanical aspects of a
home.

How does the appraisal process work?

The appraisal includes: preliminary research, site visit at the home,
external viewing of comparable sales, additional research and analysis,
reconciliation of value indications and the final estimate of market value. The
appraiser is charged with calling the property contact within one business day
of receiving the assignment to set up the home visit. Typical property
conditions and ready access to the home result in appraisal completion in about
five business days. A copy of the appraisal is sent to you by the lender
following the lender's underwriting review of the appraisal content. In the
event of an update to the appraisal, a revised appraisal report is sent to you
by the lender.

How long does a
site visit at the home take?

The length of time physically viewing the home being appraised varies
depending upon the size and complexity of the property. The time required at
the home is typically twenty to thirty minutes but can be as much as two hours
for very large or complex homes. The visit includes an interior walk-through of
all levels, an exterior walk around the property, interior, exterior and street
photos, and measurements of the home's exterior.

Following the home visit, the appraiser drives through the neighborhood.
The purpose of the neighborhood drive is to assess neighborhood factors that
impact value, and to locate and photograph selected comparable homes that have
recently sold. The appraiser typically completes the report in a couple of
business days after the site visit and submits it to the lender, who is the
appraiser's client.

Why do I have two
appraisers calling to set up a home visit?

Many lending transactions require two appraisals. However, if your
mortgage lender who is processing the loan has not advised of a need for two
appraisals, you should contact the mortgage lender to find out whether there is
an inadvertent double assignment of appraisers or an oversight in telling you
of the second appraisal requirement.

Does the home have
to be spotlessly clean when the appraiser visits?

No. Housekeeping practices are not considered when an appraiser is
valuing a home. However, if the appraiser is not able to access any portion of
the home or determine the condition of interior surfaces, a return trip may be
required to obtain necessary information to complete the report.

What is the appraiser
looking for when they make the site visit to the home?

The appraiser documents the general condition of the interior and
exterior of the property. This includes but is not limited to the floor plan,
any recent updates/remodeling, and the overall quality of construction. The
appraiser will calculate the gross living area (GLA) of the home by measuring
the square footage of the exterior. Non-living areas, such as garages and
covered porches, are not included in GLA, but are considered and reconciled in
the value estimate. Below grade/ground square footage is not included unless it
contains a finished basement. Finished basement GLA is calculated separately
from the above grade/ground GLA. Local market analysis will dictate the
contributory value of the finished basement area, which is typically determined
by the level of finish and the utility of the area. Only permanent fixtures and
land are addressed in an appraisal.

How can I assist
the appraiser completing the appraisal?

You may provide pertinent information regarding the home such as a
survey of the house and land, a copy of the original plans and specifications,
or a list of recent improvements, date(s) of improvement and their costs.

What is market
value?

Market value is the most probable price that a property would sell for
in a competitive and open market under all conditions requisite to a fair sale,
the buyer and seller, each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby: (1) buyer and seller are typically
motivated; (2) both parties are well informed or well advised; (3) a reasonable
time is allowed for exposure to the open market; (4) payment is made in terms
of cash in U.S. dollars or in terms of financial arrangements comparable
thereto; and (5) the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale.

What is the market
comparison approach to value?

The market or direct sales comparison approach to an estimate of value
compares market data, prices paid for similar properties, prices asked by
owners and offers made by prospective purchasers. These sales are listed in the
comparison grid on page 2 of the 1004 Single Family Uniform Residential
Appraisal Report (URAR). Adjustments are made to each of the comparable sales
used for major differences between the comparable and the subject property.
These adjustments may address such items as location, gross living area, lot
size, condition, age, market conditions, degree of updating, construction
quality and significant amenities, i.e.: fireplace, deck, patio, porch In the
market approach, the appraiser must gauge and reflect the anticipated reaction
by a typical buyer to differences between the subject property and the
comparable sales.

What is a
comparable sale?

A comparable sale is a home that is similar to the home that is being
financed, in terms of location within the defined neighborhood, recently sold
in an arm’s length transaction, age, condition, square footage (GLA-gross
living area) and amenities. Selecting appropriate comparable sales in most
residential appraisals is the single most important factor in establishing
value. It is the appraiser's responsibility to fully research and analyze the
local real estate market and determine which comparable sales best represent
the value characteristics of the home that is being financed.

What is an arm’s
length transaction?

An arm’s length transaction is one in which both seller and buyer act
completely independently of each other and have no connection or relationship
to each other.

Where does an
appraiser get all of the information to complete an appraisal?

There is a wide variety of information or data sources available to
appraisers. This includes, but is not limited to, the local Real Estate
Multiple Listing Service, local tax assessor's records, local real estate
professionals, county courthouse records, third party public record data
vendors and the appraiser's own personal knowledge or files from previous
appraisals. An appraiser is required to utilize the data they deem to be the
most reliable as it relates to the property they are appraising.

If the lender’s
appraisal comes out higher than the tax assessed value, could the real estate
taxes go up?

No, at least not related to the appraiser establishing a market value.
The appraiser is required to maintain confidentiality with his client, the
lender. Because the tax assessed value has no relationship to an appraiser's
market value, the taxable value may be higher or lower than an appraised value.
These two values are established using entirely different methods at different
points in time. For example, an assessor's value may use public records that
treat all square feet the same such as the finished basement area that is not
applicable in an appraisal as part of the gross living area.

What improvements
add value to the home?

The impact on value of a home improvement or update varies widely from
market to market depending on each market's perception of the value of the work
completed.

Generally, routine upkeep such as replacing the roof on a thirty year
old home is expected with no increase in the market value; while an updated
kitchen or bath is more likely to add value.

Can I ask the
appraiser questions about the appraisal once it’s completed?

The appraiser is legally bound by client confidentiality to the lender
and cannot discuss specifics of the report with you, the borrower. If you have
questions not addressed here, you may bring them to your mortgage lender for
assistance.

Your home's market value is an important
factor in a long list of financial decisions, including selling the home,
refinancing your mortgage, borrowing against your equity, estimating your
annual property tax bill, buying homeowner's insurance, calculating the
expected return on remodeling costs, managing your other investments, estate
planning and so on. The trick is figuring out how much your home is worth --
and remembering that how much you paid for it months or years ago isn't
relevant to its current market value. It's not a bad idea to gather information
from several sources and compare the findings, rather than relying on just one
approach to home valuation.

Here are four suggestions to start:

Call
a couple of REALTORS®. Even if you're
not planning to sell your home right away, many REALTORS® will be willing to
prepare a comparable market analysis (CMA) for you as a marketing service with
the goal of getting your business whenever you decide to move. A CMA shows the
prices of recently sold homes that are comparable to yours and the prices of comparable
homes on the market. A market-savvy REALTOR® can give you a rough idea of what
your home would be worth, given its size and condition and local market
conditions.

Purchase
a professional appraisal. Unlike a
CMA, a professional appraisal is rarely free. However, the several hundred
dollars you'll pay for an appraisal, depending on size of your home and the
complexity of the work, could be money well spent if you're making a major
financial decision that hinges on the value of your home. Appraisers rely on an
in-person inspection of your home, recent sales of comparable homes and other
data to arrive at an opinion of value. The appraiser's report is a full-blown
description of your home and the criteria used to formulate the valuation.

Go
to neighborhood open houses. Open
houses are a good opportunity to view comparable homes for sale in your
neighborhood and chat with real estate professionals about the local real estate
market. Two caveats: It's not easy to be objective about your own home and you
shouldn't assume that the listing price on a for-sale necessarily reflects the
home's true market value. If you keep those points in mind, information
gathered at open houses can be worth considering along with data from other
sources.

Do
research online. A number of Web
sites offer home valuation information free or for a fee. The Home Values tool
on SussyDeLeon.com can show you what houses around yours have sold for recently.

Tip: Price per square foot is a
time-honored method of real estate valuation and not a bad rule of thumb.
However, it doesn't account for a choice location, a move-in-ready home or
personal criteria and you should factor in how the property was measured and
whether the square footage includes the garage or other detached buildings on
the property.

Millions of existing homes are sold each
year, and while each transaction is different every owner wants the same thing
-- the best possible deal with the least amount of hassle and aggravation.
Unfortunately, home selling has become a more complex business than it used to
be. New seller disclosure statements, longer and more mysterious form
agreements, and a range of environmental concerns have all emerged in the past
decade.

More importantly, the home-selling
process has changed. Buyer brokerage -- where REALTORS® represent homebuyers --
is now common nationwide, and good buyer-brokers want the best for their
clients.

The result is that while hundreds of
thousands of existing homes may be sold each week, the process is not as easy
for sellers as it was five or 10 years ago. Surviving in today's real estate
world requires experience and training in such fields as real estate marketing,
financing, negotiation and closing -- the very expertise available from local
REALTORS®.

Are
you ready?

The home-selling process typically
starts several months before a property is made available for sale. It's
necessary to look at a home through the eyes of a prospective buyer and
determine what needs to be cleaned, painted, repaired and tossed out.

Ask yourself: If you were buying this
home what would you want to see? The goal is to show a home which looks good,
maximizes space and attracts as many buyers -- and as much demand -- as
possible.

While part of the "getting
ready" phase relates to repairs, painting and other home improvements,
this is also a good time to ask why you really want to sell.

Selling a home is an important matter
and there should be a good reason to sell -- perhaps a job change to a new
community or the need for more space. Your reason for selling can impact the
negotiating process so it's important to discuss your needs and wants in
private with the REALTOR® who lists your home.

When
should you sell?

The marketplace tends to be more active
in the summer because parents want to enroll children in classes at the
beginning of the school year (usually August). The summer is also typically
when most homes are likely to be available.

Generally speaking, markets tend to have
some balance between buyers and sellers year-round. In a given community, for
example, there may be fewer buyers in late December, but there are also likely
to be fewer homes available for purchase. So, home prices tend to rise or fall
because of general demand patterns rather than the time of the year.

Owners are encouraged to sell when the
property is ready for sale, there is a need or desire to sell, and the services
of a local REALTOR® have been retained.

How
do you improve your home's value?

The general rule in real estate is that
buyers seek the least expensive home in the best neighborhood they can afford.
In terms of improvements, this means you want a home that fits in the
neighborhood but is not over-improved. For example, if most homes in your
neighborhood have three bedrooms, two baths and 2,500 sq. ft. of finished
space, a property with five bedrooms, more baths and far more space would
likely be priced much higher and likely be more difficult to sell.

Improvements should be made so that the
property shows well, is consistent with the neighborhood and does not involve
capital investments, the cost of which cannot be recovered from the sale.
Furthermore, improvements should reflect community preferences.

Cosmetic improvements - paint, wallpaper and landscaping - help a home
"show" better and often are good investments.

Mechanical repairs - to ensure that all systems and appliances are in
good working condition - are required to get a top price.

Ideally, you want to be sure that your
property is competitive with other homes available in the community. REALTORS®,
who see numerous homes, can provide suggestions that are consistent with your
marketplace.

The
Essential Step to Ensuring a Smooth Transaction Is To Get a REALTOR®

More than 2 million people in the United
States have earned real estate licenses. However, real estate is a tough
business with a steep dropout rate, and the result is that only a small
percentage of those with licenses actively help buyers and sellers.

The National Association of REALTORS®
(NAR) includes 1 million brokers and salespeople, individuals bound together
with a strong Code of Ethics, extensive training opportunities and a wealth of
community information. NAR members are routinely active in PTAs, local
government committees and a variety of neighborhood organizations. Being
actively involved in community affairs provides REALTORS® with a better
understanding of the area in which they are selling.

Why?

Buying and selling real estate is a
complex matter. At first it might seem that by checking local picture books or
online sites you could quickly find the right home at the right price.

But a basic rule in real estate is that
all properties are unique. No two properties -- even two identical models on
the same street -- are precisely and exactly alike. Homes differ and so do
contract terms, financing options, inspection requirements and closing costs.
Also, no two transactions are alike.

In this maze of forms, financing,
inspections, marketing, pricing and negotiating, it makes sense to work with
professionals who know the community and much more. Those professionals are the
local REALTORS® who serve your area.

How
do you choose?

In every community you're likely to find
a number of realty brokerages. Because there is heated competition, local
REALTORS® must fight hard to succeed in your community.

The best place to find a local REALTOR®
is from REALTOR.com's® extensive listing of community professionals and
properties. Other sources include open houses, local advertising, Web sites,
referrals from other REALTORS®, recommendations from neighbors and suggestions
from lenders, attorneys, financial planners and CPAs. The experiences and
recommendations of past clients can be invaluable.

In many cases buyers will interview
several REALTORS® before selecting one professional with whom to work. These
interviews represent a good opportunity to consider such issues as training,
experience, representation and professional certifications.

What should you expect when you work
with a REALTOR®?

Once you select a REALTOR® you will want
to establish a proper business relationship. You likely know that some REALTORS®
represent sellers while others represent buyers. Each REALTOR® will explain the
options available, describe how he or she typically works with individuals and
provide you with complete agency disclosures (the ins and outs of your
relationship with the agent) as required in your state.

Once hired for the job, the REALTOR®
will provide you with information detailing current market conditions,
financing options and negotiating issues that might apply to a given situation.
Remember: Because market conditions can change and the strategies that apply in
one negotiation may be inappropriate in another, this information should not be
set in stone. During your time in the marketplace REALTORS® will keep you
updated and alert you to each step in the transaction process.

One of the keys to making the
home-buying process easier and more understandable is planning. In doing so,
you'll be able to anticipate requests from lenders, lawyers and a host of other
professionals. Furthermore, planning will help you discover valuable shortcuts
in the home-buying process.

Do
You Know What You Want?

Whether you are a first-time home buyer
or entering the marketplace as a repeat buyer, you need to ask why you want to
buy. Are you planning to move to a new community due to a lifestyle change or
is buying an option and not a requirement? What would you like in terms of real
estate that you do not now have? Do you have a purchasing timeframe? Whatever
your answers, the more you know about the real estate marketplace, the more
likely you are to effectively define your goals. As an interesting exercise, it
can be worthwhile to look at the questions above and to then discuss them in
detail when meeting with local REALTORS®.

Do
You Have The Money?

Homes and financing are closely
intertwined. (Financing is the difference between the purchase price and the
down payment, commonly referred to as debt or the mortgage.) The good news is
that over the years new and innovative loan programs have evolved which require
a 5 percent down payment or less. In fact, a number of programs now allow
purchasers to buy real estate with nothing down.

In addition to a down payment,
purchasers also need cash for closing costs (the final costs associated with
closing the loan). Several newly emerging loan programs not only allow the
purchase of a home with no money down, but also underwrite closing costs.

Not everyone, however, elects to
purchase with little or no money down. Less money down means higher monthly
mortgage payments, so most home buyers choose to buy with some cash up front.

As to closing costs, in markets where
buyers have leverage, it may be possible to negotiate an offer for a home that
requires the owner to pay some or all of your settlement expenses. Speak with
local REALTORS® for details.

Is
Your Financial House in Order?

Those great loans with little or nothing
down are not available to everyone: You need good credit. For at least one year
prior to purchasing a home, you should assure that every credit card bill, rent
check, car payment and other debt is paid in full and on time.

Any of these actions could
lead to a delay or cancellation of your closing or a denial of your loan.

Avoid changes in debt.

DO NOT take on new debt.

DO NOT use credit cards to
make purchases that will increase your debt.

DO NOT start purchasing
furniture.

DO NOT apply for a new loan.

DO NOT co-sign a loan.

DO NOT purchase or lease a new
car.

DO NOT pay off a car loan.

DO NOT close major credit card
accounts.

DO NOT open new credit cards
or store accounts.

Avoid changes in employment.

DO NOT change your job or
career.

DO NOT quit your job.

DO NOT go on disability if
avoidable.

DO NOT take maternity leave if
avoidable.

Additionally...

DO NOT file new tax returns.

DO NOT make unusually large
bank deposits.

DO NOT have any major
surgeries if avoidable.

DO NOT legally change your
name.

DO NOT change your social
security number.

DO NOT spend your down
payment.

DO NOT stop making credit card
payments.

DO NOT stop making payments such
as rent or utilities.

If you
are going through a divorce, please consult your attorney before entering into
an agreement.

Avoid any actions that
negatively impact your ability to qualify for your mortgage loan, or initiate a
new round of paperwork. If you have any
doubts about doing something that may affect your ability to qualify for your
mortgage loan, consult your loan provider before you do it.